In 2025, the healthcare industry is poised for significant transformations. Executives from LRVHealth, a prominent venture capital firm, have outlined five key predictions that will shape the future of healthcare. These changes span digital health investments, artificial intelligence, care delivery models, healthcare coverage, and pharmacy spending. The insights highlight both challenges and opportunities as the sector adapts to new technologies and policies.

Evolution of Digital Health and Market Dynamics

The digital health landscape is expected to undergo a period of consolidation and reevaluation. Over the past decade, substantial investments have flowed into digital health startups, but this trend is anticipated to slow down. Many companies may either merge or cease operations due to their product-centric rather than company-centric focus. However, this shift could lead to a resurgence in mergers and acquisitions (M&A) within the healthcare sector, potentially opening up new avenues for investment.

Keith Figlioli, managing partner at LRVHealth, foresees a more active M&A market starting in 2025, with significant announcements likely at the JPM healthcare conference. This activity is expected to continue throughout the year, possibly leading to an IPO market revival for healthcare companies in the second half of 2025. The movement on the M&A front will also facilitate the flow of funds back to limited partners (LPs), marking a pivotal moment for investors. While the initial surge in digital health investments may wane, the sector's evolution will pave the way for more sustainable business models and innovative solutions.

Emerging Trends in AI and Care Delivery Models

Artificial intelligence (AI) in healthcare is set to face a reality check in 2025. Many pilot projects are expected to fall short, but a few sustainable use cases will succeed and scale. Areas like ambient scribing and prior authorization are likely to see notable traction for AI applications. Additionally, clinical decision support systems will begin to gain momentum, offering potential solutions to workforce burnout and shortages over the long term.

Ellen Herlacher, partner at LRVHealth, predicts a shift away from value-based care towards clinical efficiency innovations. These include top-of-licensure plays, site-of-care optimization, virtual care, and clinical extenders. Such innovations create new access points, address clinical shortages, appeal to patients, and are reimbursable in fee-for-service environments. Improvements in access, patient experience, unit cost, and throughput will position clinical enterprises favorably when negotiating future value-based care contracts. Moreover, changes in healthcare coverage, such as shifts in ACA exchanges and potential reductions in Medicaid funding, will influence how care is delivered and financed. Prescription drug pricing will also come under scrutiny, driving innovation in pharmacy business models focused on access and transparency.